We Fixed It, You're Welcome - Are There Too Many Managers?

Starting point is 00:00:00 Welcome to We Fixed It. You're welcome. The show where we take over companies, you come along for the ride, and we try to put them back better than we found them. A lot of us are wired to achieve. Give us a task. We'll crush it. Tell us we can't do something. We'll prove you wrong. Dangle a promotion. We will chase it relentlessly until it's ours. Because of this, we've built an entire economic system where people who stick around, show their loyalty and prove their worth expect to move up. Bigger salary, more responsibility. Not all of us want these things, but a lot of us do. Recognition, compensation, mobility, fulfillment. So, we play the game and over time, we move up. We get put in charge of others. We earn leadership titles. And once we've climbed the ranks, we don't want to move backward. That's the big problem we're dealing with today. Have we created a system that has too many decision makers and not enough executors? Are there too many managers? And if so, is this a recipe for disaster for our labor market? Are we all doomed? Well, that's a big question, probably one for a labor economist. Fortunately, we have a great one with us

Starting point is 00:01:11 today. Joining us is Ron Hedrick, one of the most respected labor economists in the country, and someone who looks at the workforce from a macro level with very real implications for how companies operate and succeed. Ron's the principal economist at Lightcast, they're a big deal, a former Bureau of Labor Statistics Economist, and a trusted advisor to Fortune 100 companies, staffing firms, and policymakers. He's also the author of The Demographic Drought and a report called Who's Going to Do the Work, which feels very appropriate for our conversation today. Ron, it's so great to have you. Tell us just a little bit more about yourself. I mean, you kind of hit a lot of it. I've been a labor economist for like forever. It feels like

Starting point is 00:01:50 33 years. Started off the Bureau of Labor Statistics. I think that backing put me in a situation where all that really ever mattered to me was the data. I was taught very early. You know, don't write your opinions. You know, let the data speak and if people disagree with you, then they have to come at you with better data. That was a valuable lesson for me over the course of my life. And I think, you know, what I've valued, what I try to write when I speak, one of the things that means the most to me is that people can't tell the motivation. You know, I'm not trying to support any particular side. I'm just trying to show people what's happening and let them make the decisions. I'm not going to make the decisions for you, you know,

Starting point is 00:02:26 because I'm an economist. We only raise problems. We don't solve them. Apparently, that's what we get told. So, yeah, that's kind of been, that's been my whole career pretty much. Well, thanks, Ron. We're going to put you to work today for sure in this conversation. You're going to be instrumental to everything we're talking about. And let's just go there. We're going to talk about something that we've all been taught to play into. So success is equivalent to upward mobility. So you get a degree, you get a job, you learn the ropes, you stand up under pressure,

Starting point is 00:02:56 people start to trust you, you're in. You get to manage others. You become a leader in the company. Well done you. If you get a promotion, that's something to celebrate. If you get passed over for a promotion and stay exactly where you are, I guess you didn't have what it takes. But the truth is, we can't all move up all the time, can we?

Starting point is 00:03:14 And we can't all be delegators. Someone has to do the work work. So that's where the numbers get interesting. Even at a tough labor market like this one, the U.S. still has roughly 6 to 7 million open jobs. These are millions of open roles, but ask around. People are struggling to find work, which doesn't add up. Except a lot of that demand is concentrated in roles.

Starting point is 00:03:34 that require plugging in and executing, not making top-down decisions. Despite this, we as a society continue to place value on degrees and career advancement, even in fields that are showing real signs of saturation. Let's think about this, as more people keep piling into fields that are already full and expecting to rise to the top quickly, that seems like a misalignment. Unless I'm wrong, that kind of misalignment could upset our entire labor market. So that's where we are. Lots of existing managers already have jobs and want to move up or at least keep the jobs they have. Lots of managers have lost their jobs due to downsizing and are actively looking for management roles. They want those existing jobs.

Starting point is 00:04:15 And there are lots of fresh-faced Wadda-be managers just entering the workforce that don't want to stay entry-level. They want what we've all been promised to move up. They want those jobs. Are there too many managers? Ron, I know you've got something to say about this. Why don't you get us started? There's just so much to say about this. I think, first off, we have to understand that management is pretty much anything. It's like, it's a supervisor up to a CEO. You know, there's going to be directors and managers and vice presidents and presidents. And some organizations have every single kind of iteration of those you can possibly have. And so you do end up with layers. And I think the most important thing that you said is these are created because you're trying to reward your high performers, but there's only so far you can go. And I think also, you know, let's say you're a developer and you kind of did that for a while.

Starting point is 00:05:06 You're like, well, I don't want to code forever. I don't, I don't see myself retiring coding someday. You know, I would like, you know, more responsibility. And so companies in order to kind of keep these people around, maybe, you know, harness their intellectual capital will create these opportunities. Well, the key word here is create. Like, maybe it didn't exist. And you just keep creating levels of management. And then layoff time comes around and we go in and we slash all these middle managers. And I think what we did is kind of forgot, well, what was the. manager there for. Well, they had intellectual capital that we were trying to harness, but in the role that they moved into, that had less value. So, you know, if you look at all

Starting point is 00:05:41 white collar roles in this country, so everything that pretty much has a degree, the largest bucket is actually managers. So when we talk about, you know, white collar workers could lose their jobs. The biggest bucket would actually be managers. So are we going to use technology to replace managers or managers are going to try to use technology to replace their workforce? And if that's a case, then who are they managing? So that's why we say, like, there's so much to unpack here. We could take this in so many different angles. Well, Tino, you start. Take us from the talent perspective. And, you know, you laser it in on talent all the time. You know, what do you see? It's really interesting because, you know, my focus is actually working with companies to help

Starting point is 00:06:19 build out their organizational structure. So the question of how many managers is too many managers and who is on the leadership team and who's, who's an I see. And I think, You know, as we have this conversation, I think it's important to know that there's no one-size-fits-all metric here. You know, it's not a slope and you're at the 95th percentile. So that means that you're automatically a manager. It really does depend on the organization. So, for example, you know, if you're a team of 40 people, right, not everybody can be the CEO. There's one CEO, right, the person at the top.

Starting point is 00:06:56 That CEO cannot manage 39. other people, that's impossible, right? So there is numbers and there is data and there's a science called organizational psychology on the why in what that number breakdown looks like. There's science backing that. The reality to Ron's point is it's about people's intellectual capital, what they're bringing to the table, because you might have somebody who's a very senior I see, we call it, in the organizational psych world, which is an individual contributor who they might not have any interest in managing people. And actually you see this a ton in the creative and marketing and design field, which I specialize it, right? There's some designers who say,

Starting point is 00:07:40 I love getting in the nitty gritty. I've been doing this for 15 years. I have created a brand around what I do. I love this. I never want to sign off on somebody's vacation. I never want to manage a direct report. Right. And so as one shared, you're creating. these new levels within kind of what management looks like. And what you're also saying that is often talked about is sometimes managers are not actually managing people. So it's also how we define management in terms of this middle management piece. So I think it's very important to look at it from that lens and understanding that,

Starting point is 00:08:21 yes, there can be too many if, you know, your 40 and 40 people are managers, it doesn't work. but it really is very specialized and nuance to your organization and what you do and also your industry. Organizationally, have we built a system where someone is offered an opportunity to move up, to delegate to others, and they say, no, I don't want that. I don't want to take that on. It doesn't coincide with my personality or my, isn't it perceived as some kind of a deficit in that individual a lot of the time.

Starting point is 00:08:58 It depends, right? And again, you're looking at these huge organization. Let's talk Oracle for a second. We just laid off 30,000 people this week, right? That's a lot of people. A lot of those people were, quote, unquote, middle managers. In organizations like that to grow, it is, again, a numbers game. How many people can you have under you? How many people can you, you know, how many levels and rungs can you climb so that you can get ahead if you're wanting more. voice and impact into the work that you're doing, right? Again, when we look at management and CEO and executive leadership, it's the people who are making decisions, right? That is what management.

Starting point is 00:09:41 That's kind of what the resource that you're kind of fighting for is who is it making those decisions for your team, the impact of the work that you're doing. Not everybody can make the decision. We can't have too many cooks in the kitchen. So yes, for, huge organizations, that's how you move up. For organizations that are successful in today's market, where maybe you don't have 10,000 people, it's a smaller team, you're not focused on how many managers, it's how is this team, this person making that impact for you? And it's more nuanced. And those are the people who are successful. So it's also changing this mindset. This mindset of you need to become a leader to move up, that's changing today because as Gen X is,

Starting point is 00:10:35 Gen Z is trying to get into the workforce. They're realizing, I only have, there's only this many managers because this is, so how can I move? How, what can we do? And so, you know, I'm curious, Halissa, as someone who works in like the operation side of things too, like, what are you seeing from that angle? Well, you know, Ron, I think this is an amazing topic and I'd really love to hear your side from the data and economic side, but this topic really hits close to home for me. I've been lucky enough to spend decades of my career, invisible value driving roles, operating roles, leadership roles, where I was building teams, tightening processes, fixing leaks in the system. But over the past couple years, I've had a very personal look at what happens when companies

Starting point is 00:11:22 get too stat at the leadership level, at the very top. I've now been laid off from two VP level roles in a row, both during restructuring periods. And it's not because the work wasn't valuable. I was leading one area I was leading a team of 450 people and another company. I developed all the teams post-off, post-sales. So five teams, 150 people, zero to 150 in four years. So it's because the structure got heavy, what you were talking about, Ron. too many people managing the work, too few people actually doing the work.

Starting point is 00:12:00 And so when companies rebalance, they often do it with that blunt instrument, which is layoffs. Oracle just did it. They cut costs by terming leadership. I understand it's a for-profit. It's that I've had to make those tough decisions. I've had to lay off probably over a thousand people in my lifetime. The irony is that many of these people being sidelines are the ones with the deepest expertise, pattern recognition, their operational instinct, all these things. And Ron, I mean, we're

Starting point is 00:12:28 talking about, you know, this continual merge of workforce. You know, I have a senior in college right now getting ready to graduate in a month. And these are the very people that need mentoring, right? And that, you know, need the leadership and stabilize your workforce right now. So I've seen my peers struggle in this environment, economic environment. But I'd love to hear, you know, what are the conversations you're having with companies and especially those, you know, C-suite people that need to think about how do you recalibrate and make sure that you have the right blend operational expertise, leadership expertise, you know, culture expertise, all the things that are important. You hit upon what I think is the most important part of this whole thing. And that is what you do with experts,

Starting point is 00:13:20 who don't want to manage. Like, what's the career path for somebody who just wants to make more money because they're killing it at what they do and they want to, you know, advance in that? So my title is principal economist. Over the course of my life, I've done well in certain jobs, and I've been promoted into leadership positions that I really didn't want, and I was given teams. And I did everything I could to get out of those positions because for the exact reason

Starting point is 00:13:44 you said, like, I'm an analyst. I want to analyze data. I think I'm good at it. I've gotten better as I've gotten older. I've been rewarded for that. And I've had been able to do that without acquiring a management title. And I think that that is the biggest problem. We do value intellectual capital.

Starting point is 00:14:02 But you're right. Once you gain this title, it becomes the, what is it, the scarlet letter. Like, you're now, you've got, you're marked. Like, and if something goes wrong, they're going to come in and wipe these people out. And we completely forgot about the intent of why we put them there in the first place. That's a corporate problem. I mean, Jill can speak to that. That's an organizational problem.

Starting point is 00:14:20 have not created a system of reward for what these people are doing. I saw a tremendous video. And this is a very powerful statement that was in this video. And basically the point of video was you're seeing these layoffs now because the cost of capital has gotten much more expensive when interest rates went up in, you know, in 22 and 23. And when these things happen, then you have to offset that cost of capital by laying off. And the person's point, which is so brilliant and it said, if you, if your role, if you can say that your role is tied to creating revenue or protecting margin, then you're valuable. More trouble you have explaining how your role creates revenue or protects margin, you're in a very dangerous place. You should not struggle to

Starting point is 00:15:05 illustrate that point. That should be words that come immediately out of your mouth. And I think that what happens is when you marginalize a bright person by sticking them in a management role where they are now distanced from that, you know, creating the revenue or protecting mortgage because they're just literally managing people. I mean, you've really set them up to fail. And I think corporations, if you go way back, the core of all of this, and this was in the original demographic drought paper, is that college attainment exploded in the 70s. You know, we used to be a nation that had very few leaders and a lot of workers, you know, a factory, a boss, and a supervisor, a foreman, and everybody else was working and they did that for 40 years and then they retired.

Starting point is 00:15:48 And then everybody went to college. We wanted them to do that. And now you have all these people who come out and they're aspiring to something more. So they have to pay back their college bills. They have to, obviously, they feel like they have to make more money. And I think what that did unintentionally is you end up creating an enormous world of leaders. And you can't have all leaders. You can't go into battle with 20, you know, 50 generals and one private.

Starting point is 00:16:11 You know, somebody's got to be there to do the fight. but we've created a culture where the private doesn't get rewarded in a mean. So they look at that and say, well, the only way that I'm going to get rewarded is by being a general. So I would really, you know, my challenge to everybody is always that are the people who are executing the vision of the company, are they the highest rewarded? You know, the managers should almost, you know, that's just the different profession. Does that necessarily earn more pay? I don't know. If all you're doing is, is filling out a schedule, you know, that sounds to me like it's less valuable than the person who's literally, you know, doing that work on the line. But we've created a reward and incentive program that

Starting point is 00:16:46 is built all around this. How do you undo that? Maybe Chino knows. I don't know how you undo that. And I'll talk about it because I'm helping, I'm helping companies do just that. So I love what you were saying about the general and the private, right? The challenge here is the private, you can't become a general without being a private, right? It's not a manager. You're not just a manager out of nowhere, you've had to have the experience going behind. They ask seven, eight years of experience. You've needed to be a private at one point. I want to actually pull back a layer too, because when we're talking about layoffs and you really, this is the big thing when I talk about managing up to a lot of the different people that I work with, it's you need to be able to

Starting point is 00:17:29 share why you add value. I'm a people person. I'm in recruitment. I am not doing any of the work, but I'm bringing the people in to do that. If you don't have a solid team, you have nothing. The people are your value. And that's why it's important to hire an expert like me or to have someone on your team like me to get you the very best. That's the value.

Starting point is 00:17:51 The problem is, who are you saying that to? What is the room you're speaking to? If you're a private, you can show that. As a general, are you a junior manager where you don't actually have access to that executive? in a room where you're actually able to state your case and say, you know what, this core team is incredibly fundamental in the work that we do. We will not make money. We will not have a profit without this team. This team doesn't function without direction and I'm that direction, right?

Starting point is 00:18:23 And so the challenge with a lot of middle managers is they don't have that access to the top management who are making the decisions on where to cut. And so what I try to to train a lot of leaders is, again, that managing up. You need to constantly show your work. Show your work. Have paper. Write it out. You know, you should have a little list of like, what are all the great things that I do? Because when the time comes to this and if you're not able to, they have no idea. They're asking, you know, what's Chino doing? Right. She's hiring a few people, but like, you know, she's not doing the work. No, I've hired you the best people. I'm the one to do this for you. I'm the only person that has been able to successfully do this for you. And it's why you're

Starting point is 00:19:07 succeeding. That's why you keep me. And that is a is a challenge that a lot of people face in their career, that middle stage where they're like, I don't know how to sell myself into these larger rooms. And so what you see is they get kind of waffled away. Often they go back into being a private versus that general. And then it creates a larger gap. And so you have to be a lot of, more people who are a little lost versus having that seat at the table. Yeah, I love what you're saying, Cheno, because I do believe that, you know, how you communicate and how you manage that upward trajectory is really important. I also think, Ron, you brought this up, but when you're sitting and I've sat here at the C-suite,

Starting point is 00:19:56 I've sat at the table, and you're having these discussions, that component of it is really, very little of the discussion when you're talking about laying up 30,000 people. You're not going through 30,000 reviews. What you're going through is, okay, this is the P&L. This team costs us this much. The collateral damage would be, we can move some of this work to AI. We can move some of this work over to offshore it, you know, and pay $10 per hour versus the $45 an hour we're paying. And our customers may, you know, feel a little pain, a little more friction, but, you know, we're pretty embedded in the marketplace. So we're not going to lose, you know, Brand, like Oracle. I'm not going to lose Bram recognition, blah, blah, blah. So, you know, I agree that what, you know, with what

Starting point is 00:20:50 you're saying, and especially in like these hypergrowth startups where there's, you know, a team of less than 50 people or even less than 100, you can make a huge impact by making sure that you're communicating exactly what value you're adding. What's the value proposition there? But I think that when we're looking at larger, you know, when we're looking at economies of scale and we're looking at everything across the board, Ron, like, how do you change that, you know, how are we going to culture shift? Because, again, like people coming out of college have an expectation that, you know, I've hired a bunch of these people myself where they are like, how did you get your job? And I'm like, well, I've been doing this for 30 years. Thank you very much. You know, and they're like, well, I want to be vice president,

Starting point is 00:21:37 you know, I want to be head of this, you know, in two years. I'm like, okay, well, put in the work, you know, more power to you. I love ambition. I love that. But, you know, I'm seeing that, you know, we've created this monster, you know, like where we've talked about, like where, you know, and I'm seeing this struggle with some of my friends and family where they have kids that are struggling with, do I want to go to college? I'm, you know, da-da-da-da. And like, I love that we, I have a really great friend right now and son struggled to decide whether I want to go to college. I don't want to go to college, blah, blah, blah, so didn't it. And is now doing, you know, a tech trick or an actual trade, right? Getting certified is going to have plenty of opportunities

Starting point is 00:22:23 because we need people that are going to do those things. We need electricians. We need plumbers. We need, you know, you know, mechanics. We need all of those kinds of things. And people don't view that in today's world as the right career path. And then like, you know, when we think about middle management, you know, there's this whole idea that you start out as an IC, right, Chino, you start out as an IC, then you get to be a team lead, then you get to be a supervisor, then you get to be a manager or assistant manager, you know.

Starting point is 00:22:55 But really, to your point, Ron, not everybody's made out of. that mold and not everybody can motivate and inspire and and keep a team accountable and connect the dots for them, you know, with the overarching company goals. And so I really feel like this is a very big. Aaron and Ron, we kind of picked a really big thing to talk about, but I'd love to know, like, how are we communicating this again with with the people that are making some of these decisions and how are we going to, you know, manage the influx in the, you know, in this economic world. Yeah. Well, Ron, I want you to speak to this, but it seems like the middle management area is also has the most, it's the most precarious, has the most vulnerability because you see

Starting point is 00:23:44 these companies do these massive wipeouts and you figure, okay, the entry level, the easily trainable, replaceable, we'll just, we'll get, we'll get that, we'll get rid of them. those in the middle that has some degree of autonomy, but we can't quite place what they're going to do and what their trajectory looks like. Well, they can go. And we've been at this for a while. We've seen companies that are performing pretty terribly,

Starting point is 00:24:08 and those that are insulated at the top that are making the bad decisions, they stick around. You know, they just tend to, they survive. I would say, you know, you're bringing up a really important point is that we can go back through time and go through many companies that did kind of some epic, And they're still doing, they're still here.

Starting point is 00:24:27 Like, they're doing, they're doing it fine. In fact, you know, corporate profitability right now is sitting in record levels. Like, companies are making an enormous amount of money. We have companies who seriously overhired in 22 and 23, which is why they're laying off now. And their profitability is still fantastic, not oracles, of course, but, you know, it's still great. I mean, if let's not kid ourselves, it's not like they were like, we have no money. They're seeing that they could have some problems. But, you know, you do have a lot of companies who are making these things.

Starting point is 00:24:54 because they're like, well, we're comfortable. Our shareholders are comfortable with us making this amount of money. We have to make sure that we stay at that because anything less than netting that amount of money is going to look like we're weak. And then, you know, we're going to lose the value. Our shareholders will get more upset and then we're going to have to do these things. So let's get in front of that. Let's lay off all these people right now. It would be one thing if people were punished for doing that, but only the very worst companies who already had lost a market share, you know, a BlackBerry or something like that are truly in jeopardy. You know, if you still have a dominant position, if you're an Amazon or a Google and you lay off,

Starting point is 00:25:27 I mean, you are who you are. No one's coming in to take your spot. The barriers to entry are astronomical. I mean, you're hundreds of billions of dollars to try to unseat them. So they can do these things. And I think that is in essence a problem because in good times, you continue to, you hire, maybe you over hire. You promote and maybe you overpromote.

Starting point is 00:25:47 And then the second things get bad. And they do because economies always go up and down. You can't stop that. You can delay it. it's always going to happen. You're going to have this whiplash effect for all of those sins that you committed, right? Like, you sat there for years promoting all these people up because you're really killing it. And then in this particular case, the cost of capital goes up because interest rates go up. And now you have to reconcile everything that you did. And unfortunately, those are human beings.

Starting point is 00:26:13 So they're caught in the middle there. Their punishment. And this is what happened. A friend of mine told me about this when when Doge was doing their layoffs. You have people who aspired to be leaders. And then so they get those leadership positions. And then they were let go because they had this higher number. But these were people that were killing it that were promoted because they were good. You know, he goes, what happened was they came in and took these people out. And what they were left with were the underperformers, the overperformers that they had promoted were gone. And I looked at that. I'm like, at the time we were being told, well, you know, we're measuring twice and cutting once. And he was like, absolutely not.

Starting point is 00:26:51 That is absolutely not what happened. He goes, they gave us a number and they said, hit the number. And if you don't come up with it a week, we'll come in and just erase that number. And I think so many companies, Melissa, you just pointed that out. In Oracle's case, what is it? They needed $8 to $10 billion. They found a way to getting $8 to $10 billion by adding different buckets together. And then they go, cannimal.

Starting point is 00:27:10 You know, whatever happens in the future is going to happen. We'll deal with that when we get there. But for right now, we got to make sure that we can overcome this particular deficit. So it's definitely nothing strategic. about the way people lay off. They're usually very quick decisions. It feels like they're made within two weeks or a week. Or sometimes I feel like, you know, somebody woke up that morning and said,

Starting point is 00:27:29 uh-oh, we saw the numbers. You know, we got to get rid of this many people. The thing is the people that did the cutting aren't going to learn a lesson from that because they protected themselves. They're just happy. They made it through another day. They don't really care. Like, the things will get ugly again because eventually they're going to be told,

Starting point is 00:27:46 hey, we may have too many people start hiring. And they're like, okay. And they start hiring again and they start promoting. And then you go through the same thing again. And each time they're going, did I get that? I didn't. Okay. I'm just going to go back and keep repeating those same bad habits.

Starting point is 00:28:00 Yeah. Well, I'll stand up for my people in sales and marketing too. We're always on the chopping block, no matter good economy, bad economy. I've been the last one standing more times than I can count simply because I just keep doing what I do. And I watch everyone around me. the halls get pretty quiet. But that is something that contributes to bottom line revenue.

Starting point is 00:28:24 That drives a company forward and still a company's mandate or the marching orders are cut something. Oh, well, we better cut sales and marketing. And the most management positions are company bloat. We better get rid of those. Those are my people. Yeah. Aaron, you bring up a really good point is that when we think about like where we're cutting, and this is Chino where I love that I'm so glad.

Starting point is 00:28:48 you're one of those people that is helping leaders to think about this. But it's amazing to me that marketing is always the first team to go because how are you supposed to grow? How are you supposed to have any more sales? You know, and I, yeah, you know, and the other thing is, you know, I run operations. And so operations were an expense line. So they're always like, get more productive, you know, AI this stuff. Well, you can't AI everything, you know, and you still need somebody to answer the phone, you know,

Starting point is 00:29:22 and people are still going to call and complain about really random things. And so I really think that that is part of it is like really having that intentions, you know, around how you make decisions that really can help you stabilize, Ron, like, you know, like the market's up and down and up and down. And we all know that we make decisions as humans and some are good, some are. not. And how do you kind of go through that with, you know, trying to derive this intention and understanding what are the consequences of these types of actions that you're having? And, you know, I had a role. I was a consultant and that was my role was, you know, Hatchet Queen.

Starting point is 00:30:08 And I would go in there and it was really interesting to me because when we did the first round of layoffs, we went floor by floor. It was pretty difficult. And I was with the COO of a hospital. And the first group freaked out. Of course they did. And crying, yelling, a lot of screaming going on. And we were kind of sitting up there. And we got in the elevator to do the next round. She said, I don't want to do anymore. And I said, look, I'm like lugging a suitcase with, this is when you would give them the packages as you said, you know, and Kleenex and all this stuff, because I knew this was going to happen. And I'm like, we've already presented it to the medical board. We've already presented it to the leadership team. This is a $9 million initiative here. So if you don't want to do it, like, where are we going to get the $9 million?

Starting point is 00:31:02 Right. So again, it's just like those decisions at such, you know, really important levels are just, you know, I feel like it's really unfortunate for those middle managers because they're doing everything they can to help this company, help their customers, and yet they're not being valued for that. And a lot of times, they're just getting shut out the door. I have something I really want to say here real quick, real quick. You were talking, you asked the question of how do you avoid this thing? And it's actually, if you got so much better at forecasting, you would. So what happened is in 21 and 22, we had pumped what, $1.2 trillion into our economy, right? Through these, through COVID checks, through all this pandemic assistance. And we had this explosion in demand. I was looking at real

Starting point is 00:31:55 retail sales this morning. And you have this massive spike. And then ever since then, it came down. And now it's been flat for several years. If you go to the long-term growth line, you put a trend line on it. The line where we're at right now is actually getting about to equilibrium again. The problem is, you thought these explosive years were real. But they're not real. These were never real. What caused you to have this bloated time of expenditures? Well, it was this event. Is that event going to stay? No, that event is going away. In fact, there will probably be a whiplash event to correct for that. But no, you hired for that event. If you want to prevent laying off in the future, understand what your actual potential really is and be realistic

Starting point is 00:32:34 and stop sitting there trying to appease people above you by going, I think it's 20%. No, it's flat. Maybe it's 2%. But we have this tendency, I call it, recency bias. You sit there and you go what you just did and you go, we're going to keep doing that. I'm like, no, maybe what you just did was because of something very specific, but you're so poor at understanding those things. Or you wanted to appease somebody. So you gave them these larger projections. That's how you get yourself into trouble. If you want to get yourself out of trouble, look at yourselves a lot more coldly. Be realistic about who you really are as a company. Are you really that great? Were you in the right place at the right time? Is that right time going to go away? So I want to talk about, kind of the layoffs, right? Like we talk about the trend. We're talking about what do middle managers do. So what I'm seeing now speaking to a lot of these middle managers who are saying, Hey, Chino, help me. What should I do? There's a role here. What are you seeing in the marketplace? You know what's happening? Middle managers are not taking those leadership positions anymore. They're saying, I want to stay in I see because we know this mass swoop for the Googles of the world,

Starting point is 00:33:36 right, for the big, the oracles of the world. You have that on your resume. Unfortunately, although you'll be a part of it, it's almost like, what is your risk appetite, right? It's almost like stocks. Like, are you going to risk it knowing that? You know what? In a year, maybe two years, you'll probably be laid off. But is this, you know, asterix on your resume? Is this having Google? Is that going to get you to the next step likely? So it's about kind of your appetite for risk, is what we're seeing. And for those that aren't up, don't have that risk appetite. They're saying, you know what, don't want to be a manager. I want to stay and I see and it's a trend that I keep seeing. You hit the nail on the bar. This is what I do, Ron. It's the data. I sit there with

Starting point is 00:34:18 leaders and I say, listen, look at your team. What makes sense? Who's making money? There's like a nine box of your core players, you know, high performing, low performing, and looking at how to kind of look at your entire team. And I get a lot of leaders to do this exercise to say, what's working? Again, these middle managers, sometimes you think, oh, no, as we discussed, they're often the most senior, tenured expertise in whatever department that they're in. And so letting that core person go actually allows that the rest of that team to kind of run wild and lose. And again, you're keeping, as we discussed earlier, not your high performers. You're creating, you're keeping your lower performers. And that isn't good for business because, as we said, sure, you might make a decision to kind of correct the quarter, the year.

Starting point is 00:35:16 But guess what happens in two or three quarters for now? That actually rebounds and you actually lose money because who's the sales, who's the marketing, who's hiring the people to get to fill the gaps. And a lot of leaders are very short-sighted. And so what I come in to do is to look at that. So what I would say to middle managers who have that risk appetite who say, hey, Google, let's go on a quick little date. If you can think about it like that, you're just dating. We're not going to get married here. It's going to be a few couple months, maybe a year, maybe a little longer.

Starting point is 00:35:48 But that's it. I'm using you to go out there so that I can go and work for a smaller company and then I can be an IC who will actually have value and have enough, have less numbers to actually see my impact. So people are choosing that. Other people are saying, I don't want anything to do with it. I only want to work in a small setting. And that's okay, too. And others are saying, I don't want any part of the rat race. Like you said, Melissa, some people are saying, I want to go into trades.

Starting point is 00:36:14 I don't want to be a part of this. It's so much back and forth. And it's become such a trend to course correct by layoffs. And I don't have that appetite. So it's interesting. And as a middle manager, you need to figure out very quickly what your appetite is and then move accordingly. Yeah, one of the things that I've seen, and this is kind of,

Starting point is 00:36:32 in possibly a fix. I don't know. Look at me. It is this idea around one of the companies I worked at, you know, there were career ladders and you would have like, you know, the way you would go from, you know, as you start here and then you move up and you move up the leadership ladder. There's a management family. There's, you know, an IC family and we would call it professional family, which kind of was weird, professional meaning tech, so like software engineers and things like that that you brought up Ron. And one of the things that we really spent a lot of time doing and a lot of research on, which I was very impressed by, is like pulling those families together and putting the different leveling, the compensation leveling and the rewards leveling and balancing that so that you could

Starting point is 00:37:25 see that an IC level six, for example, which is pretty high if it's a one through eight level for ICs was really equal to a director level in terms of leadership based on what value they were bringing to the table in terms of what they were doing and based on all of the competency, Chino, you know all those competency matrices and all of the KPIs and the metrics that they were going to be required on. And then it allowed them to have a path to grow that wasn't about, being in the management family, right? As well as the professional family. So when you think about tech and engineers and software developers and product folks,

Starting point is 00:38:11 they may not want to be managing, leading a team, right? They may just want to stay in their space. If they're software engineer four, that's equal to a pretty high-level senior manager. So I think that if companies can start to do that, it allows them to, feel like they're not saying no to their ambition and their ability to grow as an individual, but as an employee, but they have that opportunity to know what path can I, and do I know, and is there transparency, I know that I am being compensated for that, right? And I know that if I really wanted, you know, X amount, and yeah, I'm going to have to go

Starting point is 00:38:57 into leadership at some point and become a senior VP, right? Like that would be clear, but, you know, they may be very happy being IC level seven because, you know, but they're being compensated well. They're very, they feel like they're contributing. Their outcomes are great. And they have, you know, a great work-life balance, whatever it might be. So I do think that's a path. I mean, I think when I talked about recalibration and the values that people that managers are bringing. I also want to think about the values that all the other team members are bringing and that why middle management isn't necessarily the answer to all answers. And Ron, you brought it up. Like, if I want to make money, you know, and leadership is the only path, then I guess I have to do that. Why doctors don't have

Starting point is 00:39:47 many managers because I can make money my entire life being a doctor and I can retire at 80, still being a doctor? And I would think, why did they do that? Why weren't they aspiring for management? Because they were well rewarded for the job that they were doing. Right. Yeah, Melissa, you started us on our fix. Let's roll with it.

Starting point is 00:40:05 We could probably talk about this for a very long time. But let's just fix it. We're going to do this. So if companies, here, I got four blocks for us. If companies recognize the value of independent contributors and place at least a parody, if not a premium on that, along with management, that's a good starting point. If companies think longer range and, like Ronnie said, not just look at anomaly events and

Starting point is 00:40:34 call that the future trajectory of the company, like call it what it is and say, well, that's a blip. Let's put that into perspective. That's interesting. We're having a moment. This moment's not going to be around forever. Think longer range and plan accordingly. And there's going to be market cycles.

Starting point is 00:40:48 You're going to hire, you're going to over hire, you're going to trim down some of the levels. We know that, but, you know, be responsible when things happen on either sides of those swings. Don't just assume that middle management's the problem. So if you're going to do unilateral cuts across the company or you're looking for problem centers, don't just start from the middle because you're creating instability and things can really fall apart quickly from there. And then if we think bigger, maybe rethink the value system of a company and the premium, not that we place on management and climbing the ranks and that being the sign of recognition of contribution to the company, but also status within the company. And, you know, we talk institutionally. You know, how do we not only create that parity and flexibility for the independent contribution?

Starting point is 00:41:45 beaters, but make that more of, you know, what you strive for in a company is to be a powerhouse of one and make that more of an institutional model of what makes a company successful. So that's four things. I put a recipe together for us if we follow our own advice and we start rolling this out to companies and that starts to impact our labor market and our economy. Melissa, did we fix the situation? This is a huge problem to fix. I think we took a bite out of it. I don't know that we actually fixed it, but I love this idea about rescoping the management roles, rebuilding IC career ladders. I think it's

Starting point is 00:42:27 really important to really think about, I'm going to reach into Chino's world, you know, the cultural backlash, you know, retention risk and all those types of things. And I think that we really need to start building teams and companies with intention and thinking about the purpose and what the expertise needs to come in to play to really help a company grow and be successful. I love what Ron brought up about data, using data to help you, but also being careful about metric myopia in terms of over-correcting, which you mentioned by overtracking. And we do that with individuals and teams where we say, oh, this team isn't doing well, just looking at metrics that may not actually tell the full story of what's really going on. So I do think there's a lot there. And I think

Starting point is 00:43:20 there's one thing that we didn't even touch on, which we've touched on on a lot of other episodes, but is AI and what that's doing to the economy of the company and the workforce today. And, you know, hopefully people, leaders, not using that as an excuse to get really. rid of middle management because we still need decision makers. We still need expertise. All right. Thanks, Melissa, Chino, did we fix it? I think we, yeah, took a bite of it. I think there's a little bit more work to do on the fix. For middle managers and the trend right now, I think if I were to give you any tips, it's look at how to be an IC. If you're okay to date Google for a second so you can get Google on your resume, awesome. If you're not,

Starting point is 00:44:05 move to IC, that is the trend. And I see that's the thing. going to continue to happen with larger companies. I think companies, you should never be overhiring. As Ron said, data, data, data, data, there's never a moment that you should let a blip control the narrative in your story. You are a business. You need to make a profit. There's no way you should be overhiring for the blip. Be smart and be strategic and intentional with who you bring on. And with that, who you also make leaders. Not everybody's a great leader, as we know, the saying goes, people don't leave bad jobs. They leave bad managers.

Starting point is 00:44:43 And I'll leave it there. But I think we kind of fixed it. Thanks, Chino. Ron, little bite, big bite. How did we do? If you would address one part of this, I think you could address it would be a pretty big bite. And this goes back to what I was saying. A really good company that's really sharp understands those external data points that got

Starting point is 00:45:02 them to where they are. How did we get successful? Is that market protected? Is the remote? Are we going to sustain that? Was this a blip? What caused that blip? You know, if we could do those things, then we would go, hey, I know you all want to hire right now. I know we're all working really hard, but we're looking at this and seeing that we're not going to get passes. But, you know, a lot of companies will look at this and go, yeah, but I got to squeeze every dollar out of this opportunity right now. So I'm going to hire up for that. Well, then there's a whiplash effect. You're going to have to lay off. And if you're comfortable, if you're a company that's really comfortable with that, then it's not a problem for us to solve because you're saying, look, I'm going to squeeze out every piece of juice when this market's doing well.

Starting point is 00:45:42 And if that means I over hire, then fine. And then the second this thing goes down, I'm going to let all these people go. You know, there's a human toll to that. And none of us are comfortable with that. I'm very uncomfortable with it. I'm a very empathetic person. And I hate when somebody loses the job. It hurts. I've been there. And it hurts. And I don't like to see those things. But welcome to capitalist. You know, this is what we've signed up for. Every time you take a job, it's your job as a person who's getting ready to work in that company to see the viability of that company. Do they have a long runway? Are you going to have a great career there? Or is this a company that's capitalizing on a moment and you're going to be subject to that moment ending? And I think that we all bear responsibility

Starting point is 00:46:20 for that. And I love what was said earlier. Turn down that promotion opportunity. If you think it's going to put you in a riskier position, oh, what I can make more money. Well, I understand. You may not be making any money if you get cut. Everybody owes, everybody plays a part of this. That's a good point. Thank you, Ron. Well, that's going to bring our episode to a close. We are clocking out once again.

Starting point is 00:46:42 Thank you, Melissa. Thank you, Chino. Big thanks to our special guest, Ron Hedrick. Ron, tell everyone how we can track what you're up to and keep up with you. Yeah, the best way of doing it is you follow me on LinkedIn. It's Ron L. Hetrick. You can get my name from this. But if you look me up on LinkedIn, you'll see I have a reputation for

Starting point is 00:46:59 poking the hornet's nest, as everybody likes to say, I like to touch subjects that I think a lot of people feel are a little risky because I feel like I have the data to explain those, and I could do it in a very apolitical way. I can do it in a way that I think you need to know. I've, a lead author of Demographic Drought, Who's going to do the work, The Rising Storm? I was a co-author on fault lines, which just came out from lightcast.io. Likecast, one word, dotio. All these articles are basically research papers are free. You can catch me speaking all over the country. Sometimes you'll see me on the news. Who knows? I'm all over the place. Thanks, Ron. Yeah, and definitely, definitely everyone, check out Ron's LinkedIn. There's a lot to dig in there.

Starting point is 00:47:37 To our wonderful listeners, we've got a job for you too. If you like our show, go talk about it. Tell some people. Those people tell other people. We know how this works. Tell lots of people. It'll keep you very productive, and I bet you could beat last month's quota for the number of people you told. Our little show is getting close to number one for our category. And if you get us there, we might just be talking promotion. We see a bright future in you. Keep living up to your potential, and we will see you next time. We hope you enjoyed this episode if we fixed it, you're welcome. We go into every episode somewhat cold,

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We Fixed It, You're Welcome - Are There Too Many Managers?

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